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Geopolitical Unrest Poses Threat to US, Energy Interests

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Geopolitical Unrest Poses Threat to US, Energy Interests

Unfolding geopolitical events in the next few years will pose risks to the United States as well as the global oil and gas industry, a U.S. ambassador told attendees at the Deloitte Oil & Gas Conference last week.

Evolving, worldwide geopolitical events over the next two years will create difficulties for the United States, said Ambassador John Bolton, foreign policy senior fellow at the American Enterprise Institute.

Not only will Russia and China pose potential threats to U.S. interests, but so will Iran and other Middle Eastern countries where the Arab Spring did not deliver promised results of bringing in an alternative influence to al-Qaeda.

Russian President Vladimir Putin –a popular leader despite election irregularities – is one leader who bears watching. Putin has called the Soviet Union's collapse a major geopolitical catastrophe and has sought to reassert Russia's influence in its previous space through its use of military force against and interference in elections in former Communist states, Bolton said. Putin and his cohorts have also used the profits from oil prices to upgrade and modernize the Russian military at a time when U.S. military funding will be hampered by the pending fiscal cliff.

The conventional wisdom on China is that the nation will rise peacefully and become a responsible global economic power. However, it is only one out of several scenarios that could occur, Bolton said, noting that China faces weakness in its economy and on social issues. China's economic statistics still have "lots of Communist math", such as People's saying it will produce 1,000 widgets on the books regardless of whether it actually does.

China's 20-year, one-child policy has created a significant imbalance of sexes in China, resulting is a growing cadre of young men who likely will never marry any bride, and definitely not a Chinese bride, Bolton said.

"If there was ever a factor that could destabilize a society, that is it."

The country has used its growing wealth to upgrade its conventional military forces as well as expand its nuclear arsenal substantially higher than largest U.S. estimates. China also has emerged as having the most advanced cybersecurity warfare capability, with the People's Liberation Army having launched a number of attacks against U.S. government agencies as well as major U.S. corporations. These sophisticated cyberattacks have been launched by the Chinese military, not some graduate student with idle time on Saturday night, Bolton noted.

Additionally, China is constructing its first bluewater navy in five centuries, and though its construction efforts are proceeding slowly, the fact that they're pursuing naval capability is significant. At the same time, China is seeking to push back the U.S. Navy presence from the western shores of the Pacific where the U.S. naval fleet has dominated since 1945.

Bolton noted that China has become more belligerent and aggressive in seeking to carve up offshore territory in the South China Sea – including shoals and rocks barely above the water line – not only to expand its territory but lay claim to the oil, gas and other mineral resources believed to lie beneath the sea. China's efforts to assert sovereignty in the South China Sea will impact Australia, South Korea and other Asian countries. While the United States' official position is that it would like to see the South China Sea dispute peacefully resolved, there's no doubt what the peaceful resolution will be China claiming more territory.

"We shouldn't overestimate our influence internally in China but shouldn't assume China will be responsible," Bolton told conference attendees.

China will likely keep pushing towards asserting its power, Bolton said, noting that those seeking to predict China's future path should look past the previous 25 years of economic growth to its tumultuous past of dynasties and republics rising and falling, internal turmoil and invasions over the past centuries.

Bolton moved on from that "happy news" to discuss the ongoing destabilization of the Middle East, where the geopolitical situation has devolved over the past two years, threatening U.S. allies such as Israel and Arab oil-producing regimes for a variety of reasons.

These reasons include the fact that peace talks between Israel and its Arab neighbors have not only stalled but are going backwards. Talks between Israel and Palestine are at a dead stop, Bolton noted. At the same time, the rise of the Muslim Brotherhood to power in Egypt means that Hamas, a subsidiary of the Muslim Brotherhood, can now work closely with the Egyptian government, which puts it in the strong position. This has made the Sinai Peninsula very dangerous and unstable as it's being used as transit in ways it wasn't before for terrorist purposes.

Egypt has also called into question land for peace from the Camp David accord. Whether the accords are scrapped or eliminated, Israel's border along the Sinai is more vulnerable than ever.

Unrest in Syria, where both Russia and Iran want to keep Hafez al-Assad in power, also is contributing to the overall strife in the region. Contrary to predictions, Assad has held onto power and 30,000 civilians are dead. Russia has its only Mediterranean base in Syria and never wanted to deal Assad out. Iran is prepared to shed a lot of Syrian blood to keep Assad in power, Bolton said.

What's worrying to oil-producing states is the wave of post-colonial Arab nationalism has been replaced with wave of Islamic fundamentalism.

"Even the Saudis with their brand of fundamentalist Islam are worried over Egypt," said Bolton, noting that 100,000 Coptic Christians have voted with their feet and fled Egypt rather than stay with their Muslim Brotherhood neighbors.

The real face of the Arab Spring in Libya emerged with the massacre in September of four Americans, including Ambassador J. Christopher Stevens.

"There's no doubt there were repeated requests for additional security, and we already knew the area was dangerous with the previous assassination attempt on the British ambassador and withdrawal of the Red Cross," Bolton said. "Whether it was because we didn't have the assets or they weren't deployed, there was no aid for the Americans."

While the assassination of the our Americans was not of the same magnitude of the September 11, 2001 attacks on the World Trade Center and the Pentagon, the attacks signal that the United States should be attacked with impunity, Bolton said.

Iran poses a significant threat as the country makes progress in achieving its 20-year goal of constructing a broad nuclear weapon infrastructure. The United States' position is that Iran should not have nuclear weapons, but the previous presidential administrations fiddled around as Iran made progress on its program, which may have reached the point where there's no effective diplomatic way to stop it.

"What's the compromise, Iran with a small nuclear weapon program or a peaceful weapon program monitored under the International Atomic Agency?" said Bolton.

"To believe that Iran can be contained like Russia was during the Cold War is delusional," Bolton commented. "The calculus of the ayatollah is different from Cold War Russia. The message to the Iranians is that, if you're patient and have money, the U.S. can't stop you."

Even if Iran's nuclear program could be contained, it wouldn't stop neighbors such as the Saudis, Turks and Egyptians from following suit, which will make a troubling situation even worse, Bolton noted.

Israel sees a nuclear-capable Iran as an existential threat, which is a correct assumption. Israel has struck twice before, and Bolton doubts Israel will wait and see if sanctions imposed by the Obama administration work.

The United States should have sought to detain the situation over the past four years, but was distracted by its own economic woes. However, U.S. adversaries are not gracious enough to let the U.S. get its economic house in order, Bolton said, making strong U.S. leadership even more critical than ever.



Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

WHAT DO YOU THINK?

Post a Comment Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
John Trallo | Nov. 23, 2012
All the more reason the US needs to move away from fossil fuel and fast track investment in renewable energy sources. That is the only path to real energy independence. The technology exists, and is advancing rapidly.



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